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Lloyds Banking Group shares are top of the UK Index this morning, the bailed out bank having rewarded and pleased faithful investors with its plans for a 0.5p special dividend (politically motivated?) which takes the full year 2015 payment to 2.75p and its yield to a respectable 4%.
That’s the good news. Now back to reality, without the smoke ‘n’ mirrors. Lloyds Banking group revenues rose by just 1% and net profits fell by a considerable 58%. As usual there is lots of talk about underlying growth, which makes the numbers a quagmire to navigate. And while we accept removal of TSB to allow analysis of continuing operations following the unit’s sale to the Spaniards, PPI (and litigation in general) has become, in our view, too regular a feature to strip out.
Another £2.1bn last quarter is almost equivalent to that booked for the whole of 2014 and almost doubles the full year charge since October’s 9-month results. After all, we know that said provisions are here to stay for another 2 years. Which is well beyond many investors current crisis-induced short-term horizon. And within that time-frame, Lloyds Banking group has warned on the impact of a low interest rate environment (no comment on negative rates) as well as taxes on bank profits.
Furthermore, despite the shares rallying by around 10% they have already encountered a hurdle in falling highs from last July. And after bouncing 21% from recent 2.5yr lows, this may prevent any progress towards the 73.6p level which needs to be regained before there can be any hope of the chancellor’s planned full privatisation of the government’s remaining 9% bailout stake in Lloyds Banking group.
Mike van Dulken, Head of Research, 25 Feb 2016
This research is produced by Accendo Markets Limited. Research produced and disseminated by Accendo Markets is classified as non-independent research, and is therefore a marketing communication. This investment research has not been prepared in accordance with legal requirements designed to promote its independence and it is not subject to the prohibition on dealing ahead of the dissemination of investment research. This research does not constitute a personal recommendation or offer to enter into a transaction or an investment, and is produced and distributed for information purposes only.
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